Commuter Tax Benefits

Commuter tax benefits make good economic sense for your company and employees:

• Employers save on payroll-related taxes.
• Employees save on federal income taxes.

Federal tax law (Section 132 [f] of the Internal Revenue Code), allows employers to offer transit passes or vanpool subsidies to employees and allows employees to set aside pretax income to pay for transit or vanpool fares. Employees may set aside up to $245 a month from their salaries before taxes to pay for transit and vanpool fares, and up to $245 per month for qualified parking expenses at or near an employer’s workplace from which the employee commutes via transit or vanpool. The transit and parking benefit may be combined for a total benefit amount up to $490 per month. Transit services, publicly or privately owned or operated, and employer-provided or sponsored vanpools qualify under the tax-exempt program.

Employer Savings

Providing pretax commuter benefits to employees can save payroll taxes for employers. The value of the benefit paid to employees is considered a tax-free transportation fringe benefit; therefore, payroll taxes do not apply. Employers can save roughly 9 percent in payroll taxes on the amount employees set aside. If the employer chooses to offer the benefit in addition to salary, giving an employee $245 in transit benefits turns out to be less expensive for an employer than raising the employee’s salary by $245.

How It Works

The commuter tax benefit is available only through an employer-sponsored commuter benefit program. Starting a program is easy: 511NY Rideshare can help find the right one. Whether you choose to offer a tax-free transit benefit, a pretax payroll deduction program or a combination of the two, it’s a win-win for your employees and your bottom line.

Once your program is launched, 511NY Rideshare can help you to encourage enrollment and participation through our complementary programs, such as Guaranteed Ride Program and transit trip planning, creating an incentive for employees to enroll.

Whether you subsidize your employees’ commuting costs or simply make benefits programs available so they can pay for commuting costs with pretax dollars, you’ll receive substantial value and savings by providing pretax commuter benefits. If you are a New York City or Long Island-based company, you may also qualify for a grant. Click here for more information.

To get started, call 511 and say “Rideshare.”